Online learning and tutoring website, Chegg (NYSE:CHGG), is in the midst of a brutal pullback. Currently, CHGG stock is down by about 30% this morning after the company cut its outlook in yesterdays earnings call.
So, what do you need to know about Chegg?
Well, yesterday the education services company offered its financial results for its fiscal first quarter ending March 31. Chegg disclosed its lowered guidance as a consequence of fewer students opting for higher education compared to entering the workforce, in addition to concerns over increasing wages and inflation.
Chegg CEO Dan Rosensweig commented on the changing industry demand:
“The issues of enrollment, the economy, and now inflation have all impacted our industry. Students continue to take fewer classes […] With higher wages and increased cost of living, more people are shifting their priorities towards earning over learning, resulting in a lower course load, or delaying enrollment […] In the U.S. alone, we have seen approximately 1 million students forgo or postpone higher education over the last two years.”
As a result, the company lowered both its Q2 and full-year 2022 guidance in both revenue and profit.
Chegg substantially lowered its estimated 2022 revenue to between $740 million and $770 million revenue, while adjusting its operating profit to as high as $235 million. This is far worse than its previous outlook of between $830 million and $850 million in net revenue and up to $270 million in operating profit.
So, what else do you need to know about CHGG stock’s drop today?
Analysts Weigh In on CHGG Stock
Unfortunately for Chegg, investors are clearly displeased with the revised forecast. CHGG stock has shed more than a quarter off its value since the announcement, marking a four-year low for the company
If you recall, Chegg was one of the early benefactors of the Covid-19 pandemic. As schools and universities collectively transitioned to online learning, Chegg saw its popularity skyrocket — alongside its stock price.
Lately, however, the company is suffering from the reversal of quarantine protocols. CHGG has lost more than 70% of its value over the past year as students return to physical classrooms or opt to not enroll in higher education at all.
Today’s drop is especially tragic for Chegg, given its relatively strong Q1 financial results. The company reported 2% higher net sales year-over-year (YOY). Total subscribers also rose 12% YOY. Still, investors have clearly been more interested in the unfavorable forecast.
CHGG stock sits at $17.60 per share as of this writing. Let’s see what the experts think about it going forward.
- Craig-Hallum analyst Alex Fuhrman lowered their price target on CHGG from $35 to $18. Furman maintained a “buy” rating, however.
- Analyst Mike Grondahl from Northland Capital Markets also lowered their target to $27, down from $45. Grondahl maintained a “market perform” rating.
- Finally, Jefferies analyst Brent Thill lowered the price target to $30 from $55, maintaining a “buy” rating.
On the date of publication, Shrey Dua did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
